Reliance Capital has invited Nippon Life Insurance to acquire up to 42.88 percent stake that Reliance holds in their joint venture (JV), Reliance Nippon Life Asset Management (RNAM).
Nippon Life Insurance holds 42.88 percent stake in RNAM and if the deal goes through, Japan's Nippon Life will hold 85.76 percent stake in the AMC.
The deal may also trigger an open offer as it will result in a change of ownership. As per the Securities and Exchange Board of India's (SEBI's) takeover code regulation, the open offer has to be made to public shareholders of Reliance Nippon MF that hold 14.25 percent stake.
Since the deal will involve a change of control, most analysts believe the stake sale will happen at a premium to the current market price.
Reliance Nippon Life has the highest market capitalisation among the seven listed companies owned by the Anil Ambani group. RNAM’s market capitalisation was Rs 11,450 crore based on February 21 closing share price of Rs 187.
Of the 43 mutual fund players, only two fund houses -- HDFC Mutual Fund and RNAM are listed.
RNAM was listed in November 2017, at an issue price of Rs 252, while HDFC went public in July 2018 at a price of Rs 1,100 a share.
As per the current market capitalisation of RNAM, Reliance Capital can garner around Rs 5,000 crore by completely exiting the AMC business.
“The deal may happen higher than the share price as there will be a change of control,” an analyst from a well-known brokerage firm said.
As of end-December, the asset under management of RNAM stood at Rs 2.27 lakh crore.
Reliance Nippon Life AMC reported a net profit of about Rs 110 crore in the quarter ended December 31, 2018. The company earned about Rs 350 crore in revenue from operations for the third quarter.
WILL NIPPON LIFE BE KEEN?
Nippon life insurance, one of the largest insurers in the world, had acquired 26 percent stake in RNAM in 2012. Later in 2017, the stake was raised to 49 percent.
Nippon Life, a Fortune 100 company, is Japan’s largest asset manager. Japanese insurers have been among the most aggressive in overseas acquisitions. With 74 trillion yen ($678.34 billion) in assets, Nippon has ramped up on overseas acquisitions and strategic investments in a bid to diversify their geographic and business footprint.
Japanese insurers are under pressure to seek newer markets as their traditionally expensive death benefit policies are likely to see waning demand as the population in the working age group with families to support is seen declining.
Last year, Nippon Life spent at least 700 billion yen to acquire stakes in insurers and asset management companies at home and abroad.
The insurer, Nippon Life is looking at expanding its global asset management footprint which is indicated from recently acquired stakes in DWS and TCW.
It has operations in Japan, Australia, the US, China, Europe, Thailand, and Indonesia.
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